Continental’s 2018 Earnings Dip Slightly on Higher Sales

Continental’s 2018 Earnings Dip Slightly on Higher Sales

Continental AG posted net income of 2.9 billion euros on net sales of 44.4 billion euros for its fiscal year ended Dec. 31, 2018. That compares to income of 3 billion euros on sales of 44 billion euros for fiscal 2017.

Based on the exchange rate on Dec. 31, 2018, Continental recorded net income of $3.3 billion on net sales of $50.4 billion for fiscal 2018. The company’s income-to-sales ratio was 6.5%.

Continental’s Automotive Group sales totaled 26.8 billion euros ($30.8 billion), while the Rubber Group’s sales were 17.6 billion euros ($20.2 billion).

The company met its annual targets, as evidenced by its EBIT (earnings before interest and taxes) margin of 9.3%.

“Leaders deliver good results, even under bad circumstances. Over the past year, we have again demonstrated our excellent performance despite the weak markets. We are continuing to grow faster than our relevant industries and markets,” said Dr. Elmar Degenhart, Continental’s CEO, at the company’s earnings presentation to investors at its Hanover, Germany, headquarters. He attributed the company’s 2018 earnings performance to its technological capabilities.

“Autonomous driving, electric mobility and connectivity: We are the architects of an ecosystem of safe, clean and intelligent mobility. When people talk about the ‘mobility of the future,’ they mean Continental. We are supplying what others are still testing. Our solutions, components, and systems are already generating enhanced safety, efficiency and comfort in four out of five vehicles worldwide,” said Degenhart.

“Grip is one of our traditional key fields of expertise in the tire business. It is part of our corporate culture, and we transfer it even to our connectivity technology, providing dependable solutions to offer secure contact, from the road to the cloud, all from a single source like no other company.”

Continental sold 155 million passenger car and truck tires last year, a record level. The company said the trend was driven by a new record for sales of winter tires.

In fiscal 2018, Continental spent over 6.3 billion euros on projects including research and development as well as the expansion of production facilities and capacities.

“We are investing systematically, logically and substantially in the ecosystem for future mobility,” Wolfgang Schäfer, Continental’s CFO, stated in the company’s earnings announcement. “We’ve done our homework. Our balance sheet is strong. We have taken advantage of the upturn in recent years and systematically reduced our debt,” he said. The company said it is able to easily undertake acquisitions for up to 5 billion euros.

Continental said its technology portfolio once again helped it to grow at a faster rate than its markets in 2018. The company said its organic sales growth was 3%. “Our growth is testament to the confidence our existing and many new global customers have in our innovation capacity. In addition, our net income of 2.9 billion euros was almost at a record level. That is a solid result given the disappointing market development in the past year,” said Schäfer.

Continental said fiscal 2019 has gotten off to a subdued start, as expected, due to continuing market uncertainty. Continental is reaffirming its preliminary guidance from early January. Accordingly, the Hanover-based technology company expects sales of around 45 to 47 billion euros.

“The guidance for 2019 is based in part on the assumption that the global production volume of passenger cars and light commercial vehicles will be stable at 94 million. Production in the first half of the year is likely to be down on last year’s figure. In our eyes, risk factors include the unclear ramifications of economic development in China and the trade disputes between the U.S.A. and China and between the U.S.A. and Europe – and then there is also the unclear situation with Brexit,” Schäfer said.

In the current fiscal year, Continental said it will lay the important groundwork for the organizational realignment announced last July. A crucial part of this realignment is the potential partial IPO of the powertrain business, which, under the name “Vitesco Technologies,” will develop, sell and produce systems and solutions for conventional and electrified drives for automotive manufacturers worldwide.

Continental said it completed the transformation of its powertrain business into an independent group of legal entities in record time, and preparations for a potential partial IPO in the second half of 2019 are on schedule.

Continental’s executive board proposed a yearly dividend increase from 4.50 euros to 4.75 euros per share. If approved, the dividend will represent the seventh increase in a row.


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